Seeking Alpha

Alex Cho

 
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  • The Netflix Blitzkrieg - Here's What Topped HBO [View article]
    Netflix's investment into content goes in the cost of revenue column, and it also outsources infrastructure to Amazon Web Services. They don't have any CAPEX needs whatsoever, so they tend not to earn profit, because they don't have to use net income to pay for capital intensive projects. I like businesses that aggressively invest back into their business, as it indicates that management is confident that they can continue organic growth, and that profitability will occur at a much more favorable point in the company's future. In that case, Netflix should be optimizing its financial resources by investing as aggressively as possible, in-light of its situation with more capitalized competitors like Amazon and HBO.
    Aug 12 07:04 PM | Likes Like |Link to Comment
  • Why I'm Reiterating My Netflix Buy Rating [View article]
    Yeah I don't do any underwriting guys. I'm small scale, not a global investment bank.
    Aug 3 11:46 AM | Likes Like |Link to Comment
  • Why I'm Reiterating My Netflix Buy Rating [View article]
    Tulips can't produce more tulips. Apple could be an x factor. But if Amazon can't compete using conventional methods, how will Apple compete? I think Apple likes the high margin consumer electronics business, and they're eyeing the lucrative payment business more closely than they are web streaming. However, the communication space is closely consolidated with content providers, and as such it's hard to characterize the market place. Give me some more time to provide additional coverage on this aspect of the market.
    Jul 17 03:08 PM | Likes Like |Link to Comment
  • Why I'm Reiterating My Netflix Buy Rating [View article]
    We've never seen global monopolies on this scale -- ever. However, a reasonable saturation rate into the global market, at incremental pricing is what's driving the optimistic assumptions I have. Like usual, I think I'm conservative.

    Google has high global market share, and cannot compete in some restricted markets, same with Facebook. I have an article that's more in-depth on the topic of natural monopolies coming out very soon.
    Jul 17 02:55 PM | Likes Like |Link to Comment
  • Why I'm Reiterating My Netflix Buy Rating [View article]
    The analysis is based on theories relevant to competitive markets. Just because you have competitors, doesn't mean they're saturating any significant share of the market. Furthermore content costs are prohibitive for entry, and the older communication companies are trying to bundle internet with programming, even as the whole entire content business is moving to the cloud, and away from live broadcast.

    If you don't understand the sector, it's okay. If you disagree, that's fine. But how do you expect me to take you seriously, when it's clear you have no interest in growth investments.

    I'm not a value guy, I'm purely momentum and growth. Usually, people disagree because they fundamentally have a different approach on investing. That's fine. It's fine to feel uncomfortable with what's different. But that's my method, and it works for me, and it might not work for you.
    Jul 17 02:49 PM | Likes Like |Link to Comment
  • Why I'm Reiterating My Netflix Buy Rating [View article]
    Why don't you write a counter article? I haven't seen you state an argument, you're just stating terse responses to the analysis.
    Jul 17 02:44 PM | Likes Like |Link to Comment
  • Why I'm Reiterating My Netflix Buy Rating [View article]
    Yes, they can buy content, but they don't have subscribers. More competition, but no user mind share. Alternatives, but no way to get people to punch the buy button. Netflix doesn't look that competitive, but very few can compete on price on content. Netflix has already locked in key deals, and they continue to scale their business model more effectively than their counterparts.
    Jul 17 02:41 PM | Likes Like |Link to Comment
  • Netflix Has A Future: Here Are 4 Reasons Why [View article]
    Hahaha, dpaauw good point. I do have my brain farts here and there. Thanks for pointing that out!
    Jun 26 10:09 PM | Likes Like |Link to Comment
  • Netflix Has A Future: Here Are 4 Reasons Why [View article]
    Well, I prefer using profit, because if you look at the income statement very closely the profit is actually a pretty reasonable number to work with in many instance, as it dos factor back in the value of asset sales, and the like. However, the downside to an income statement is that the back-end depreciation shows up in future accounting periods, which is why capital intensive businesses like real estate, manufacturing, and basic materials use the Free Cashflow Metric, because they want to get a basic idea of what gets left after on-going investment into capital happens.

    But in the case of technology companies I find that the income statement offers sufficient information, because technology companies are in all actuality not very CAPEX intensive, instead they're R&D and SG&A intensive, which means that investment happens with gross profit, not net profit. Not to mention it's way easier to project the whole entire income statement than it is to project the cash flow statement, as the degree of variability, plus various inputs, are subject to massive swings in the valuation that are just completely unnecessary. And because DCF models require a continued projection to year 6, 7, 8, 9, 10 for a five-year price forecast to be arrived at, as you take the same projected value, and discount it back into the present, DCF has the awful tendency of deflating the value of a stock price, unnecessarily.

    I base the viability on a math formula, based purely on the value of inputs, and how they can correspond to outputs. I reject DCF, because it adds layers of difficulty for arriving at reasonable inputs, as creating a proxy cash flow statement for a company that can easily modify cash outlays in any given fiscal year, paired with all these other inputs that aren't closely correlated to price action, which pretty much makes it a useless mathematical model.

    Any MBA in Finance, will tell you that DCF doesn't model stock prices accurately, but it does give you the ability to find structurally miss-pricing in the equity market. It's extremely rare that it ever happens.

    Many sell-side firms are now opting for a P/E-based model. I do the same, and I hope you understand my stance on the topic.
    Jun 26 05:53 PM | Likes Like |Link to Comment
  • Netflix Has A Future: Here Are 4 Reasons Why [View article]
    An inflection is definitely the point at which concavity changes. The concavity meaning that yes, the rate of change goes from an increase to a decrease. You're right, but neither was the statement in my article was incorrect. Because soon after concavity changes, the trend in data hits a local maximum or minimum, and usually goes the opposite direction, especially if there's multiple parabola curves. Also, I said that "basically over the interim." In the real world, most mathematical formulas are more complex requiring multiple compositions. Anyhow, hope that explains why I used the word inflection.
    Jun 26 05:46 PM | Likes Like |Link to Comment
  • Netflix Has A Future: Here Are 4 Reasons Why [View article]
    International subscribers are growing at high rates, so I see no reason to down-play that segment.
    Jun 26 05:43 PM | Likes Like |Link to Comment
  • Netflix Has A Future: Here Are 4 Reasons Why [View article]
    Well I do see some content from the BBC on Netflix already, like Top Gear..... but I hear what you're saying, I never said European expansion was going to be a walk in the ball park, but at the same time, I believe there's a lot of potential over there.
    Jun 26 05:42 PM | Likes Like |Link to Comment
  • Netflix Has A Future: Here Are 4 Reasons Why [View article]
    Okay.... most of the stuff coming from Walt Disney, inclusive of Marvel movies, and the Star Wars trilogy will be on Netflix over the next five years.

    You can't top that. No one makes more money in the film business than Walt-Disney, and Netflix is partnered up with Walt Disney. So they're settled on content.
    Jun 26 05:40 PM | Likes Like |Link to Comment
  • Netflix Has A Future: Here Are 4 Reasons Why [View article]
    All of what you said is true.
    Jun 26 05:38 PM | Likes Like |Link to Comment
  • Netflix's Stock Valuation - Symptomatic Of Today's Market [View article]
    Hi, Amit, thanks for the thoughtful article. You write quite a well thought-out, counter-argument. That's rare and you even present it to other readers in a full article. I like that, I wish more people would do that around here, rather than flame me through ridiculously long comment posts.

    So I won't discourage you from writing, in fact I encourage this kind of debate. I will write another article, and in that article I will clarify in even more detail, and while my thought process doesn't sound that appealing to you, quite yet, I believe I can offer a counter-analysis grounded in sound academic reasoning using the theories presented in the school of economics, which will be inclusive of the theories of competitive markets, broad statistics of demand elasticities, TAM, historical growth rates, and the historical revenue driver that has yet to be initiated and will soon be.

    :)
    Jun 26 05:29 PM | Likes Like |Link to Comment
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